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With refining business turned positive, fresh investment in the oilseed crushing and refining industry is likely to see over four-fold increase in the current financial year.
According to a report by India Rating, Indian edible oil industry is set to attract fresh capital investment of Rs 450 crore in the financial year 2014-15 as compared to Rs 100.7 crore in the previous financial year and Rs 516 crore in 2012-13.
Large producers including Liberty Oil Mills (LOM), Haryana Oils & Soya Ltd (HOSL) and Rasoya Proteins (RPL) have already lined up investment plans, market leader Ruchi Soya Industries has focused on consolidation in its business with increased focus on brand promotion.
“There is requirement of higher working capital for refiners especially on account of inventory and receivables. This is because, refining unlike trading requires companies to stock inventory for a higher period (especially raw materials and finished products). Receivable days are also expected to increase given most players would be in the process of trying to expand their reach (for both branded and unbranded products) and would be required to extend additional credit period to their distributors/customers,” said the report.
RPL, for example, embarked on investment of Rs 400 crore for three years on capacity expansion of its manufacturing units across Maharashtra.
“With an investment of Rs 400 crore we are planning to expand edible oil and other business in agri sector. For the first time, we are entering into branded rice segment with non-basmati rice “Rasoya” brand sale. Also, we are exploring possibility to set up bran processing unit to produce rice bran oil with raw material procured from our own mill,” said Prashant Duchakke, Executive Director, RPL.
In addition to set a footprint in rice bran oil, RPL proposes to set up a plant for manufacturing ethanol from maize and other agro produce due to potential of increasing demand of the green fuel going forward under the mandatory blending with petrol, RPL is also looking to set up a large scale rice mill unit for processing of paddy. Plans are underway to set up two tur dal processing units in Maharashtra to enter into branded oil segment.
Meanwhile, with the 2.5% raised in import duty on refined oil to 10%, the duty differential between crude and refined oil works out to 7.5%. The revised import duty structure has widened the price differential between the landed cost of crude edible oil and refined edible oils once again making refinery operations economically viable.
Margins for Indian veg oil refineries have improved in the last three months. According to industry estimates, refineries generate profits of Rs 2-3 a kg on refining CPO currently from around Re 1 loss few months ago.
Consequently, refining units have increased import of crude palm oil (CPO). In fact, import of CPO in April 2014 shot up to contribute 90% as compared to 76% in January when refinery margins were in contraction. The trend is likely to continue in future as well.
Data compiled by the apex trade body the Solvent Extractors’ Association (SEA) showed India’s veg oil import 832,760 tonnes, 27% rise from April 2013 and 8% decline from January this year.
B V Mehta, executive director of SEA, had earlier said, "There is a difference between Indian and global prices. So, import of crude oil is attractive. This has affected crushing."
Meanwhile, India’s veg oil consumption for kitchen is likely to increase to 18.1 million tonnes for the oil year 2013-14 (November–October) as compared to 17.4 million tonnes in 2012-13 of which import share to remain at 65% in the current year versus 61% in the previous year.
| Edible oil scenario in India (million tonnes) | |||||
| Particulars | 2009-10 | 2010-11 | 2011-12 | 2012-13 | 2013-14(F) |
| Oilseed production | 32.9 | 35.7 | 36.3 | 36.8 | 38 |
| Oilseeds crushed | 25.1 | 29.1 | 28.9 | 29.2 | 29.4 |
| Crushed (%) | 76.3 | 81.7 | 79.4 | 79.3 | 77.6 |
| Edible oil production | 7.8 | 8.5 | 8.1 | 7.5 | 7.6 |
| Imports | 9.2 | 8.7 | 10.1 | 10.7 | 11.8 |
| Total supplies | 17 | 17.2 | 18.2 | 18.1 | 19.4 |
| Domestic consumption | 15.2 | 15.7 | 16.7 | 17.4 | 18.1 |
| Import share | 60.8 | 55.2 | 60.5 | 61.2 | 65.3 |
| India Ratings | |||||
